PSI6.4.4 - Total Benefits on Retirement at Normal Retirement Age: Pensionable Remuneration and Final Remuneration - Statutory Definition

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

[PN Glossary]

The Finance (No 2) Act 1987 introduced a new definition of "remuneration" into the legislation (which was subsequently consolidated in Section 612 ICTA 88) that excludes:-

1. Anything in respect of which tax is chargeable under Schedule E and which arises from the acquisition or disposal of shares or an interest in shares or from a right to acquire shares (see also PSI6.4.1); or
2. Anything in respect of which tax is chargeable by virtue of section 148 ICTA 88 (see also PSI6.4.1).

In particular, this means that share option gains - which can run into thousands of pounds and inflate final remuneration quite disproportionately - are no longer pensionable. Transitional arrangements provided for such income to be included for a short period following the change where the options or shares were acquired prior to 17 March 1987. Furthermore, as explained in PSI6.4.1any other items which are unacceptable for inclusion as pensionable remuneration may not be included in final remuneration.